Friday, February 1, 2013

What makes a great company?

We had a debate, offline, about the blog re "HP MOST HATED".  The question was "WHAT METRICS do you use to tell a great company from a bad one?"

The most common metric, it would seem is "PROFITS, Growth, and revenue"  These get mentioned in virtually every quarterly report, and most compilations of "RANK"   Meg's $12.6 B anti-profit this year and the negative growth in revenue of some $12 B as well, certainly put HP in the doghouse recently.

The one driving the HATE article in the WSJ was clearly "STOCK PRICE, ROI, ROE, and the like". There is a strong belief (and prejudice) that these two are related, and while they are over time, there can be great discontinuities as we've all seen.  On this score, too, HP is deservedly a whipping boy.

I think back, though, to Dave 'n Bill.  Their stance (and since they owned most of the company, their stance mattered) was that Profits mattered MOST, that growth and revenue were only of value to provide opportunity for employees to advance, and that the stock price would take care of itself if we did the other six objectives well.  And then they'd start the LECTURE

The lecture went something like this:

1. CONTRIBUTION to the customer drives everything -- PROFIT is simply a measure of how much contribution the customer perceives.  So the PRODUCTS, their features, and their qualtiy were paramount.  And to do that took INNOVATION and R and D.  PERIOD, end of story, ... EXCEPT for


Don't hear much about any of these from HP these days, right?

What is the last BIG CONTRIBUTION you recall being announced, descirbed, acknowledged?

EMPLOYEES, for Bill 'n Dave, had several metrics.  RESPECT of every level of contribution (hard to reconcile with the $133M paid to the top five execs under Hurd's admin, and the browbeating he gave democratically to the rest).  But the hard metrics were JOB SATISFACTION and CHALLENGE, coupled with BENEFITS.   These are the kinds of metrics that Glassdoor purports to measure, by having employees vote (kinda like the students rating the professors on campus these days).  And by that measure, Carly and Hurd and Leo flunked the Employee Likeability or Trust metrics, while Meg is  still posting reasonably good numbers.  That part augurs well for a change.  JOB CONFIDENCE, though, is pretty subpar right now, again by employee vote.

CITIZENSHIP, measured by Community Role, Environmental sensitivity, and Ethics, was always HUGELY imporant in a Dave 'n Bill era, and it didn't wane under John Young or Lew Platt.  Carly even held this up, proudly, at a time that the Valley got seduced by back-dating options (and swindling shareholders out of a cool $100 B in Silicon Valley companies).  The irony was that HP's chief counsel wanted Carly to participate and she refused.  Yes, she got big salary, bonus, and severance, while Steve Jobs only took $1 per year.  But Jobs and Apple fully swindled (and got away with the investigations) and HP did not.  Proud moment, but hardly noticed.  Hurd was untroubled by this whole category, and forced his execs to abandon their civic involvements; Apotheker was agnostic as near as I found out.  Again, this is one that Meg Whitman and presumably the Board has been working on, to restore involvement if not luster and leadership.

Not sure what all of this says, but I think it'd be useful if HP tried some R and D and built some new exciting products.   Hard for anything else to go really well without that.

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